The world’s largest oil supplier, Saudi Arabia, reduced rates for all crude grades to Asian consumers in October compared to September. Saudi Arabia kept prices in northern Europe and the United States stable.
The steep price reduction comes as Asia-wide lockdowns to tackle the highly infectious delta version of the coronavirus have curbed fuel demand. Global oil supplies are also expanding as the Organization of Petroleum Exporting Countries and its Allies, or OPEC+, increases 400,000 barrels per month between August and December.
According to a corporate pricing document, Saudi Aramco reduced the official selling price (OSP) of Arab Light crude for delivery to Asia in October to a premium of $1.70 per barrel. Versus the average of DME Oman and Platts Dubai crudes for the first time in four months. In September, the price disparity was $3 per barrel, the biggest since February 2020.
The $1.30 price cut for October over September was the most significant monthly decrease in a year. It caught the market off guard because purchasers had expected prices to drop 20-40 cents per barrel in line with movements in Dubai benchmark pricing.
The deep price cuts
However, traders and analysts believe Saudi Arabia’s chances of participating in another pricing war with other producers are minimal.
The demand is speculative. In other news, Saudi Aramco maintained its light crude price differential to northwest Europe at $1.70 per barrel less than ICE (NYSE: ICE) Brent crude. It also held the light crude pricing differential to the U.S. at a premium of $1.35 per barrel above ASCI.
Oil prices fell about $1
Oil prices fell around $1 on Monday. Extending losses after the world’s largest producer, Saudi Arabia, reduced crude contract prices for Asia over the weekend, reflecting oversupplied global markets and concerns about demand.
Brent crude futures for November were down 98 cents, or 1.4 percent, to $71.63 a barrel by 0613 GMT, while West Texas Intermediate crude for October was down 95 cents, or 1.4 percent, to $68.34 a barrel.
As output in the United States’ Gulf Coast struggles to revive, the government of the United States is releasing crude from strategic petroleum reserves. According to government figures provided on Friday, 1.7 million barrels of oil and 1.99 billion cubic feet of natural gas output remain offline, while power constraints prohibit some refineries from resuming operations.
According to Baker Hughes data released on Friday, the hurricane also caused U.S. energy companies to reduce the number of oil and natural gas rigs operating last week for the first time in five weeks. The number of oil rigs has fallen by the most since June 2020.
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